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Mortgage brokers - what have your experiences been with mortgage prisoners?

Journalist: John Fitzsimons, Freelance

ended 19. July 2022

Morning brokers

As you may have seen, it was announced this week that TSB is facing a lawsuit over the way it has treated a group of mortgage prisoners - borrowers who had originally taken out mortgages with Northern Rock, and which TSB eventually purchased.

https://www.mortgagesolutions.co.uk/news/2022/07/18/mortgage-prisoners-make-800m-legal-claim-against-tsb/

It would be great to hear about your own experiences with mortgage prisoners, and how challenging it has been to help them move onto a new deal.

I'd also love to get your thoughts on whether changes to the affordability tests will make any difference, and what you would like to see happen in order to rectify the situation. Does the cost of living crisis mean that more urgency needs to be shown in helping these borrowers onto better value deals?

Thanks very much!

 

 

4 responses from the Newspage community

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Imran Hussain
Director at Harmony Financial Services
When help was put in place for mortgage prisoners a few years ago closed-book lenders where supposed to write to their borrowers to ensure they look as their arrangements so far to date I have yet to speak to one so this is either due to them not being written to or borrowers simply not realising they may have options, but unless they proactively seek advice no one is going to find them out of thin air it's very much a situation of if you need help reach out but there also mortgage prisoners who simply borrowed way more than they could afford on the old self-cert mortgages which the borrower has to take responsibility for and must seek advice to explore any possible options.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Sometime ago now mortgage prisoners had special affordability rules put in place for them from the regulator, plus special products from lenders, to help them move to more competitive interest rates outside of these investment companies, or closed books of business. The owners of these loans were also made to write to all their customers to advise them of this by the FCA. However, only very few have, to date, reached out to new lenders and taken up this route to move their mortgage. The reasons for this could be many; they may be adverse credit clients and feel unable to get a new mortgage elsewhere (a lot of these books of business originated from specialist lenders), they may be on interest only and unable to meet the rules required to continue on that basis with a new lender (but also be unable to afford to switch to a repayment basis), the most common one is likely that the mortgage balance is simply quite small - so even though interest rates are high and have become even higher, the real world pounds and pence of that increase is not great, so therefore the motivation to move is simply not there.
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Paul Neal
Mortgages & Equity Release Advisor at First Choice Financial Services
Mortgage Prisoners are a sad state of affairs, more is needed to be done to help those stuck on a lenders SVR. Not only that we are seeing more and more people having to take later life lending who have taken an interest only mortgage and it is now coming to the end of their term, with lower or pension incomes they are failing affordability so the only options they have is to sell or take a lifetime mortgage
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James Miles
Director - Mortgage Adviser at The Mortgage Quarter
Removing stress test on affordability checks for lenders will do little to help people get on the ladder or buy the home they need. Lenders already have their own 'multiple of income' measures in place which restricts on how much a homeowner can buyer. The UK need to evolve and look at different forms of mortgages such as generational ownership, longer terms up to 100 years and more support with deposits. Why not look to Northern Ireland where you can buy new and existing homes through the Co-Ownership scheme. This will help more first time buyers enter the market and make lending more affordable. Finally, removing the Help To Buy scheme is a terrible idea without any decent contingency plan and does not seem to be thought out. It's help many people buy their new home and gained the Government profit when paying back the equity loan. Things are only going to get harder!